3 Things I Learnt From A Recent CPF Volunteers Training
As part of the CPF Volunteers group, I get regular CPF training and information that keeps me up to date with the latest CPF changes.
The CPF Volunteers training conducted by the staff from CPF held on 22nd August 2024 focused on Retirement Planning. During the course many questions were brought up by various volunteers and it gave me a much better understanding of some details that I overlooked. Here are 3 things I learned during the training:
1. Where The Additional Interest Goes
Additional 1% interest for below 55 years
If you are below 55 years of age, you get an additional 1% on your first $60,000 combined for your CPF. Say you have $30k in your Ordinary Account (OA) and $80k in your Special Account (SA), that means $20k (capped) from your OA will earn 3.5% interest (per annum) and $40k from your SA will earn 5% interest (per annum).
All additional interest earned get deposited into your SA helping the account to accumulate even faster.
Additional 2% and 1% interest for 55 years and above
Your Retirement Account (RA) will automatically created upon turning 55 years old. CPF will transfer monies from your SA followed by your OA to your RA up to the current Full Retirement Sum (FRS). FRS in 2024 is $205,800. Any monies above the FRS are remain in their accounts. From 2025, additional monies above FRS will be transferred to OA and SA will be closed.
The first $30k in your RA earns additional 2% interest (per annum), bringing it up to a total of 6% interest*. The next $30k in your RA earns an additional 1% interest (per annum), bringing it up to a total of 5% interest*. Any monies above the first $60k earns at the floor rate. Additional interest in the RA
*Based on floor rate at 4% interest. The current floor rate till 30 September 2024 is 4.08%.
2. Why You Get More Payout When You Choose The Standard Plan Over Basic Plan
Once you've chosen the Retirement Sum to be used as your CPF LIFE premium, the next step would be to select one of the 3 CPF LIFE plans that will suit your retirement needs.
Image: CPF
From the graphic above, you'll notice between the Standard and Basic plans, the Basic plan starts with a lower payout and gets progressively lower down the road. The Standard plan remains steadfast from the start amd continues to payout until death. Why that may be so is shown below.
10-20% of the RA will be utilized for the CPF LIFE Basic Plan, whereas 100% of the RA will be utilized for the CPF LIFE Standard Plan. The payout from the Basic Plan is deducted from your monies remaining in your RA first until 1 month before you turn 90 years old. After which the payout will come from the annuity. And the payout gets progressively lower once the account reaches below $60,000.
The reason why the Standard plan gives a larger payout as compared to the Basic plan is due to the 100% utilization of the RA. The higher payout is the combination of the Basic plan payout topped up with the interest earned from the annuity.
3. What Happens To Your CPF Monies If You Die After 55 Years Old
One of the frequently asked questions CPF gets is, "How much will my beneficiaries get when I die?"
Should you pass on before the age of 55, the amounts left in your OA, SA and Medisave Account (MA) will be distributed to your beneficiary/beneficiaries if you did a CPF nomination. Otherwise it'll be distributed via the Intestate Succession Act.
Should you pass on after the age of 55, amounts left in your OA, SA*, MA and unused CPF LIFE premiums will be distributed to your beneficiary/beneficiaries if you did a CPF nomination. Otherwise it'll be distributed via the Intestate Succession Act.
All interest earned from the annuity remains with the CPF LIFE pool and will not be distributed.
CPF LIFE is an insurance product and is not an investment product. The goal of the insurance product as an annuity is to provide monthly payouts for your lifetime, addressing the concern of you outliving your savings.